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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Key questions I/III Bloc 1: History, Institutions and decision-making Why did the EU emerge? Why achieved Europe a level of supranational integration which is unique in the world? How does the EU operate? Which institutions govern the EU? Are they efficient? What are efficient ways to run supra- national institutions? How is the decision-making process organized? It is efficient? What is the right mix between intergovernmental, supranational executive and legislative decision-making? Is the allocation of power fair? What are the consequence for resource allocation?

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Key questions II/III Bloc 2: Integrating goods and factor markets Is it efficient to dismantle trade barriers between EU Member States but to maintain vis-a-vis the rest of the world? What are the implications of market integration on efficiency and competition? What is the impact on economic growth? What are the implications for trade and competition policies? Is the integration of capital markets efficient? Who are the winners and losers? What are the consequences of free labour mobility in a Common Market with large income differences? What is the impact on labour markets in sending and receiving countries and at the EU level? Which groups and countries win, which lose? Does equal treatment result in welfare-shopping?

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Key questions III/III Bloc 3: Monetary Integration Is the EU an Optimum Currency Area? Are asymmetries high? How can the ECB deal with asymmetric shocks? How can fiscal discipline be assured in the Monetary Union? What are the strength and weaknesses of the European Growth and Stability Pact? What are the causes of the Euro Crisis? Fiscal discipline? Real Estate Bubbles? How can the EU avoid state bankruptcies and bank runs? Do we need monetary transfers? How should we organize them? Is it reasonable that the ECB buys government bonds? Do we need a European banking regulation? Should we return to national currencies? If so: How?

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History By the 1980s, Western European system clearly superior due to the creeping failure of planned economies. ·per capita GDP at PPP in USSR 20 per cent of US ·Per capita GDP at PPS of GDR 25-50 per cent of FRG Up to 1980s, Soviets thwarted reform efforts (economic and military pressure). Changes in USSR due to inadequacy economic system in the Gorbachev era: ·timid pro-market reforms (perestroika) ·openness (glasnost). The road leading to Eastern Enlargement

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History 1990: Estonia, Latvia and Lithuania declared independence from USSR Failed coup d’etat against Gorbachev 1991 Collapse of USSR at the end of 1991 End of cold war without a shot But end of military division? Collapse of USSR

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Failed to reform main institutions Tieded up for the Maastricht Treaty more social policy more rights for the Parliament Flexible integration, more room for national cooperations Amsterdam “Leftovers” Voting rules in the Council of Ministers Number of Commissioners Extension of issue of majority voting Amsterdam Treaty 1997

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Reform of main institutions, but poorly done Council voting rules highly complex and reduce EU’s ability to act with more members No important extension of majority voting Make shift solution for Commissioners No reform of decision making in ECB Generally viewed as a failure Main changes re-visited in draft Constitutional Treaty, 2003 Nice Treaty

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Greece surprises with dramatic violation of fiscal criteria in 2010 High and increasing interest rate spreads in Greece, Ireland, Spain and Portugal (PIGS) Risk of fiscal failure of Greece and other countries and collapse of European and global finance system Bailout of Greece and de facto transfer union Bailout of other countries was at stake (Italy, Ireland, Spain) Transfer umbrella of meanwhile 440 billion EUROs which might increase to 1,000 billion EUROs Credit ratings have been reduced even in PIGS, seemingly stable countries have been affected as well (e.g. France) Collapse of Eurosystem?

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History 2012 Announcement of ECB-president Draghi (“whatever it takes ….”) to buy government bonds calmed down the situation Declining interest spreads on long-term government bonds Stabilization of economic situation in most crisis countries, but no return to substantial economic growth. Some countries still in recession Economic recovery in Germany, Austria, Netherlands and most Scandinavian countries, recently UK Ireland left umbrella Stabilization of Spain and Portugal with modest growth rates Is the EURO crisis over?

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Deficit of 104% of GDP at EURO accession Increase to 130% in course of financial crisis 2009 Current deficit of 12,7% instead of reported 3,7% Large rescue package incl. credits of 109 bn EURO by EFSF and IMF, plus 37 bn EUROs by private debtors Debt package was linked to tight savings and reform program GDP declined by 30 per cent, unemployment rate climbed to 27 per cent Syriza led coalition government came in power 2015 Dramatic renegotiation of debt package, 80 bn EUROs and tight saving and reform program Was adopted in Greek parliament, Syriza government reelected The Greek crisis

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Banking regulation pending Reform of EU treaties regulating new transfer mechanisms and redefining the role of the ECB is pending as well New rules for the growth and stability pact (zero debt target) Coordination of social policies Paradoxically, the Eurocrisis may lead to deeper integration Outlook

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History About 60 million refugees, 20 million in other countries Most conflicts in EU neighbourhood EU and Member States signed Geneva Convention Dublin agreements failed first save third countries have to take care of refugees implies that countries at EU borders have to bear all costs refugees are not registered there and motivated to migrate to Germany and some other countries ‘race-to-the-bottom’ in standards No majority for quota system and other distribution system of refugees and/or costs The refugee crisis I

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Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker Theory and Politics of European Integration Lecture 1 History Refugee crisis is good example for coordination failure National asylum policies create strong incentives for ‘race-to- the-bottom’ in humanitarian standards Countries have either the alternative to maintain levels and receive a large share of the burden or to reduce standards as well This would call for coordination at EU-levels, but difficult to implement, since it would create losers relative to the status quo Altogether, the EU remains a construction site …. …. and will always be The refugee crisis II